Monsanto Co. v. Davis

• Citation: 25 S.W.3d 773
• Decision Date: 26 July 2000
• Docket Number: No. 10-99-284-CV,No. 10-99-275-CV,10-99-275-CV,10-99-284-CV
• Parties: (Tex.App.-Waco 2000) MONSANTO COMPANY, ET AL., Appellants v. MIKE DAVIS, ET AL., Appellees
• Court: Texas Court of Appeals

Page 773

25 S.W.3d 773 (Tex.App.-Waco 2000)

MONSANTO COMPANY, ET AL., Appellants v. MIKE DAVIS, ET AL., Appellees

No. 10-99-275-CV

No. 10-99-284-CV

IN THE TENTH COURT OF APPEALS

July 26, 2000

From the 82nd District Court Falls County, Texas Trial Court # 32-404-A

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Before Chief Justice Davis, Justice Vance, and Justice Gray

O P I N I O N

BILL VANCE, Justice.

This opinion addresses two interlocutory appeals arising out of one trial court case. Cause Number 10-99-275-CV is an appeal from an order certifying a class action. During the hearing on Plaintiffs' motion to certify a class, the trial court refused to consider the majority of the material offered by Defendants, excluding the documents on the basis that they were not admissible or were not disclosed to Plaintiffs during discovery. Among the items excluded were documents from a Louisiana national class action involving the same product and transactions as those the subject of this suit, including documents which reflected the "opt-outs" from that class, the settlement agreement, and the final judgment resolving the class members' claims. We conclude that (a) the court erred in excluding the proffered material because the rules governing evidence and discovery practice do not strictly apply in a class certification hearing and (b) the error was harmful in that, although the excluded materials may demonstrate that the class certification here is improper, the court's ruling prevented Defendants from presenting that argument to us. Thus, we will reverse the court's certification order and remand for further proceedings.

Cause Number 10-99-284-CV is an appeal from an injunction prohibiting Defendants from contacting the absent class members and from taking any action to enforce the Louisiana class settlement against those members during the pendency of this action. We conclude that the injunction must be set aside because the order imposing it fails to specify the reasons that it was issued as required by Rule 683 of the Texas Rules of Civil Procedure.

BACKGROUND

This is the second time that a dispute between these Plaintiffs--a group of Texas cotton farmers--and these Defendants--manufacturers and distributors of high-tech cotton seed--arising out of the underlying litigation has reached us. In the first, we considered a petition for a writ of mandamus brought by Monsanto Company Delta Land and Pine Co., and D&M Partnership (Defendants¹) to avoid the production of certain documents for which they claimed a privilege. In re Monsanto, 998 S.W.2d 917 (Tex. App.--Waco 1999, orig. proceeding). Like the mandamus, these proceedings are brought to us before a trial on the merits has occurred. These appeals, however, require a fuller understanding of the controversy that produced the underlying litigation.

The root of the matter

This lawsuit has its seeds in the 1996 cotton planting season in Texas. In the fall of 1995, Monsanto Company announced that it had developed a cotton plant which was genetically engineered to produce an insect-fighting protein. The gene technology which produced this attribute was patented by Monsanto and marketed under the name Bollgard. According to Monsanto's promotional material, a cotton plant with the Bollgard gene would have the ability to control common, and very destructive, pests such as the tobacco budworm, the cotton bollworm, and the pink bollworm.

A farmer was charged two separate charges for the use of the Bollgard cotton seed--the purchase price for the seed and a per-acre-planted "technology licensing fee." Most of the farmers who purchased the seed placed their technology licensing fee on an open account maintained by their local retailer. The retailer was responsible for passing the licensing fee on to Monsanto once the farmer had paid the amount then due.

Litigation sprouts

Plaintiffs, Texas cotton farmers who purchased and planted the Bollgard seed in 1996, did not believe that the Bollgard cotton performed as Monsanto represented it would. In August 1996, they filed this suit, alleging that Defendants conspired to commit and were guilty of committing acts that amounted to fraud, violations of the Texas Deceptive Trade Practices Act, negligence, and negligent misrepresentations.

Plaintiffs were not the only ones dissatisfied with the performance of the Bollgard seed. In October 1996, other plaintiffs filed a suit in Louisiana state court, styled Ren-Dan Farms, et al. v. Monsanto Company, et al.,² seeking recovery for similar claims relating to the use of Bollgard seed during the 1996 cotton growing season. The Texas suit and the Louisiana suit each included a request for certification as a class action.

Apparently, many of the farmers who used the Bollgard seed in 1996 failed to pay the fees which were due under the technology licensing agreements. In response, Monsanto sent form letters to 108 Texas farmers in November and December 1996 advising them that their accounts were overdue and requesting payment. Both form letters also contained a sentence which stated that "[a]ll accounts not paid as of September 1, 1996 are assessed a finance charge of 14% per annum." Based on these form letters and individual follow up letters, Plaintiffs added a usury count to their petition in August 1997, asserting that in the absence of an agreement to pay interest, the claim that Monsanto was entitled to collect a 14% finance charge constituted usury under Texas law. Plaintiffs again asked for class-action status for their usury claims, although they did not immediately pursue a class certification order. In November 1997, Monsanto sent out a "corrective action letter" to 100 of the farmers from whom they had not received complaints regarding the finance charge, withdrawing that charge. Ren-Dan Farms, on the other hand, moved to settlement. On May 26, 1998, the parties to that suit presented the Louisiana court with a Joint Stipulation, which outlined the terms and conditions for certification of a proposed settlement class. On the same day, the court tentatively certified the suit as a national class action and approved the form of the notice to be given to the absent class members. Six and one-half weeks later, on July 10, 1998, the parties presented the Louisiana court with an executed settlement agreement and the court rendered a final judgment, expressly holding that the class settlement "is to be all-inclusive, and to extinguish all claims that the members of the class may have arising out of the purchase and use of Bollgard cotton in the 1996 planting season, consistent with the terms expressed in the Settlement Agreement."

A second class blossoms

In July 1999, Plaintiffs requested that the court sever their usury claims and certify that severed suit as a class action. After granting the severance, the court set a hearing on Plaintiffs' motion to certify on September 2, 1999. On the day of the hearing, both sides filed briefs in support of their positions. Defendants attached twenty-four exhibits to their brief in opposition to Plaintiffs' request for certification of the class, including a certified copy of the Ren-Dan Farms' settlement agreement and final judgment and copies of the Ren-Dan Farms' class notice and opt-out lists.

At the hearing, three Plaintiffs and one of their attorneys testified. In summary, Plaintiffs generally testified that they had purchased Bollgard cotton seed from Monsanto, that they did not agree to pay interest to Monsanto for overdue technology licensing fees, and that Monsanto had assessed a 14% finance charge on their outstanding debt. Plaintiffs also tendered twenty-five documents in support of their request for class status, including letters sent by Monsanto to the growers, internal Monsanto e-mail correspondence, a summary of other documents produced by Plaintiffs' counsel, and a letter from Defendants' counsel providing information to Plaintiffs' counsel in anticipation of settlement negotiations. Through these documents, Plaintiffs sought to establish that there were 108 Texas farmers in the usury class.

Defendants attempted to counter Plaintiffs' showing by cross-examination and documents. Through cross-examination, Defendants established that all three Plaintiffs had opted-out of the Ren-Dan Farms class individually but had not taken any steps to explicitly opt-out the class of Texas farmers they aspired to represent. Defendants relied primarily on the documents which were attached to their brief in opposition to class certification. However, Plaintiffs objected when Defendants tried to introduce those documents into evidence. Specifically, Plaintiffs argued that an affidavit from the Ren-Dan Farms tabulation agent (and the attached copy of the class notice and list of the farmers who opted out of the Ren-Dan Farms class) and certified copies of the Ren-Dan Farms settlement agreement and final judgment should not be considered by the court because Defendants had not provided Plaintiffs with copies of the documents during discovery. The court agreed and refused to consider these items. Plaintiffs further asked that the court not consider the copies of the documents attached to Defendants' pre-hearing brief. In response, the court indicated that it "did not consider it because it was excluded even though it was attached to the Memorandum." At the conclusion of the hearing, Defendants made an offer of proof of the excluded items.

As part of their argument against certification, Defendants asserted that the named Plaintiffs would be antagonistic to the interests of the absent class members because:

Here, what you will find is that because of the Ren-Dan settlement and the indemnities that are present in that settlement that the other people in the class could become liable on their indemnities as a result of the actions taken by the named Plaintiffs in this suit. The...